Luxembourg, 12/07/2007 (Agence Europe) - On Wednesday 11 July, the Court of First Instance annulled the Commission's decision to make obligatory a proposal put forward by Luxembourg diamond company De Beers to progressively reduce its purchases of rough diamonds from Alrosa of Russia. Following the annulment on the same day of the rejection of the Schneider/Legrand concentration (see EUROPE 9466), the Court said, in case T-170/06, that the Commission was required to assess the proportionality of measures it took, and that Alrosa had had a right to be heard, a right denied it.
Following complaints lodged by several parties in 2003, including by the Belgian association of cut diamond importers and exporters and Edelsteinbörse Idar-Oberstein of the Rhineland-Palatinate, the Commission opened proceedings into De Beers' distribution agreements, known under the name “Supplier of Choice” (SOC). In response, De Beers offered, in January 2006, to gradually reduce its purchase of diamonds from its competitor Alrosa, and to cease entirely from 2009. This offer was accepted and made legally binding by the Commission decision in February 2006 (2006/520/EC) under the terms of Article 82 of the EC Treaty (abuse of dominant position).
That the offer was made voluntarily by the party concerned, and therein lies the rub, does not relieve the Commission of the need to carry out an analysis of the proportionality of the measures provided for. According to the Court, the Commission did not justify why the total cessation of all commercial activity between the two parties was a necessary and proportionate measure for maintaining undistorted competition. In addition, it was not clearly established that Alrosa had been able to avail itself of the right to be heard before the decision. The Court, consequently, annulled the decision. The Alrosa press office did not wish to comment, and Lynette Gould, spokeswoman for De Beers in London, confined herself to saying: “We really need to analyse the statement from the Court in order to assess the impact on our business, and until we've done that we can't comment any further”. Jonathan Todd, spokesman for the competition commissioner, said that the Commission “will study the ruling carefully and decide … whether or not to appeal”. It now has two months to decide. (cd)